London urged to seize Islamic insurance opportunity

The London market was encouraged to grasp the opportunities of Islamic insurance by a senior U.K. government minister yesterday (30 October).

Baroness Rona Fairhead, a Minister at the Department for International Trade, pledged UK government support in positioning the London market as a global leader for Islamic insurance at a conference organised by the Islamic Insurance Association of London.

“My message here today is that we in government are here to help you".

Takaful insurance is a form of insurance which complies with the principles of Shariah law by eliminating the three "forbidden" elements of gambling, uncertainty and interest.

Baroness Fairness said she is determined to: "use the full force of my department, and indeed government, to ensure the UK remains one of the most open jurisdictions for Sharia-compliant investments in the world.”

She noted that London is already home to a strong bedrock of Islamic financial services expertise which gives a strong platform to expand into Takaful insurance.

“We have over 20 international banks offering specific Islamic finance,” she explained. “Just to put that in perspective, that is nearly double the number located in the US and we are far ahead of other Western countries.”

“The globalisation of the Takaful industry has only emerged over the past 25 years. But even with its infancy comes opportunity. The [insurance] market has already recorded double-digit growth in recent years, with premiums averaging 14 percent per year growth between 2012 and 2014".

She continued: "Sharia compliant assets currently, even at $2 trillion, makes up only 1% of global financial assets. Yet, 25% of the global population is Muslim and it does not take a genius to conclude that this sector has extreme latent potential. Indeed, the sector is forecast to grow by almost 20% next year.”

She added: “So my message today is simple. Whilst London leads the way in Europe in the provision of Islamic financial services, we now have an opportunity to be at the vanguard of insurance provision too.

"That is why the launch of the Islamic Insurance Association of London in 2015, and the ongoing terrific work that Max [Taylor] and his team are doing, is so important and timely.

Max Taylor is the former chairman of Lloyd's and the founding chairman of the Islamic Insurance Association.
She concluded: "I would urge you to take advantage of the global opportunities in that market".

However, the London and U.K. Insurance industry has historically not found it easy to turn these opportunities into reality.

Principle Insurance Company Ltd was launched to write Takaful motor and household cover and issued policies between July 2008 and October 2009 before going into run-off.

Lloyd’s has also made a number of attempts over the last decade to establish a Shariah-compliant syndicate and gave “in principle” approval to the takaful-specialist MGA Cobalt last year to launch a takaful syndicate, in partnership with Capita, but the start has been delayed over discussions with potential capital providers.

In 2006, the then Lloyd’s managing agency Creechuch launched a takaful Syndicate 3786 but that endeavour was also short-lived.